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Testimony before the Subcommittee on Zoning and Franchises of the New York City Council Real Estate Board of New York

September 7, 2016

The Real Estate Board of New York, Inc. is a broadly based trade association of over 17,000 members, comprised of owners, developers, brokers, managers and other real estate professionals active throughout the five boroughs of New York City. We believe that the City Planning Commission properly approved a special permit pursuant to Zoning Resolution Section 74-711 to facilitate the construction of a new building on a vacant parking lot located at 42 West 18th Street in Manhattan. REBNY supports the Commission’s well-considered decision which found that the applicant had satisfied all of the required findings for a Section 74-711 special permit. The City Council should respect the Commission’s decision and should not deny the special permit or impose additional conditions that are not supported by the Zoning Resolution.

The Manhattan Borough President has objected to the special permit, stating that the Commission was obligated to apply the requirements of the recently enacted Mandatory Inclusionary Housing (“MIH”) program in establishing the terms and conditions of the special permit. This objection is based on a misinterpretation of Zoning Resolution Section 74-32 and directly contradicts the documented intent of the MIH program. Applying MIH to a special permit that merely rearranges otherwise permitted residential floor area on a zoning lot is not required under Section 74-32, would defeat the purpose of Section 74-711 and would endanger the restoration and continuing maintenance of landmarks throughout the City.

The Section 74-711 special permit is meant to encourage new development and facilitate the restoration and maintenance of historic structures. It provides economic relief to property owners of zoning lots that include landmarked structures by allowing use and bulk modifications. In order to qualify for a special permit, the Landmarks Preservation Commission must first issue a Certificate of Appropriateness for the new development and a report stating that the proposed bulk modifications relate harmoniously to the historic building(s) and that the required restoration work contributes to a preservation purpose. In this regard, the property owner must execute and record a deed restriction that ensures that the historic buildings will be restored and maintained in sound first-class condition in perpetuity. Section 74-711 thus allows property owners to benefit from context-appropriate zoning modifications in exchange for a commitment to restore and maintain historic buildings.

The bulk waivers available under Section 74-711 allow an owner to utilize available floor area on a zoning lot which is encumbered by landmark buildings. In turn, this new construction provides an owner of an underbuilt historic building(s) financial resources to restore and maintain it. If these bulk waivers are available only in combination with MIH, it may not be financially feasible for property owners to commit to a costly preservation plan. As a result, property owners will be less inclined to utilize the landmarks special permits for residential projects, which will result in more commercial and as-of-right development and less restoration and maintenance of historic structures—an unfortunate result that would not further the goals of historic preservation or MIH.

Moreover, the text of the MIH statute is ambiguous, meaning that it must be understood in the context of its legislative history. Section 74-32 provides that the Commission “shall apply” MIH “[w]here a special permit application would allow a significant increase in residential floor area.” The Borough President argues that this language is “clear” on its face. In fact, the statute is inherently ambiguous, because “increase in residential floor area” is susceptible to reasonable interpretation. The Borough President criticized the statute’s lack of clarity when it was before the Commission, but has now changed course. REBNY also raised the question of the applicability of MIH to special permits during the public review process. The ambiguity in Section 74-32 primarily results from the fact that nothing in this section defines the baseline from which “a significant increase in residential floor area” is to be measured.

However, there is a clear answer in the legislative history, because the issue was specifically addressed during the ULURP process leading to enactment of the MIH legislation The Commission’s February 3, 2016 report on the legislation makes clear that the MIH program’s requirements would not be triggered by a special permit application that – like the Adorama application – did not seek to increase the maximum residential FAR allowable on a zoning lot. In its report, the Commission acknowledged that testimony had “raised questions about how the Commission will decide whether or not to apply MIH in conjunction with future land use applications,” and the Commission specifically recognized the view of “[t]he Manhattan Borough President” favoring “the application of MIH within future special permit projects in Manhattan.” However, the Commission made clear that “The program is not expected to be applied in conjunction with special permit applications that would reconfigure residential floor area that is already permitted under zoning, without increasing the amount of residential floor area permitted” because “the program should not discourage types of actions with a valid land use rationale that may facilitate residential development but would not themselves increase residential capacity.”

This legislative history clearly demonstrates that the Commission did not intend the MIH program to apply to special permits that merely rearrange residential floor area. The Commission handled this application consistently with the interpretation of the statute that it has supported throughout the ULURP process. In contrast, the Borough President’s claim that the text of the statute is unambiguous and requires the provision of MIH is contradicted by the legislative history that supports the Commission’s position. Applying the MIH program to the Adorama special permit would defeat the intent of the statute, deny the applicant a special permit to which it is entitled, and endanger landmarked structures throughout the City. REBNY respectfully urges the City Council to affirm the Commission’s grant of the special permit without any modification or conditions.